Fitch Solutions’ unit BMI said that despite monetary policy easing and the expected two more quarter-point cuts in key interest rates before year-end, it still sees the Philippine peso appreciating to as strong as ₱55 against the United States (US) dollar.

“Despite rate cuts by the BSP [Bangko Sentral ng Pilipinas], the peso will strengthen slightly from current levels as the evolving situation in the US weighs on the dollar,” BMI said in a report published Wednesday, Aug. 20.

On Wednesday, the peso strengthened against the US dollar, closing at ₱56.96, which was also its intraday high, from ₱57.1 last Tuesday, Aug. 19. The local currency hit an intraday low of ₱57.39 after opening at ₱57.25.

Total trading volume declined to $1.826 billion from Tuesday’s $1.976 billion, according to the Bankers Association of the Philippines (BAP). Markets were closed on Thursday, Aug. 21, as the country commemorated Ninoy Aquino Day.

“We expect that the currency will end the year a touch stronger than the current spot rate of ₱57.22:$1 as there remains the risk that investor confidence in the US dollar may weaken further,” BMI said.

It added that it “continues to expect the peso to trade in a range of ₱55.2-59.2:$1 through the second half of 2025.”

Alongside this forecast, BMI also sees the US Federal Reserve (Fed) cutting rates by 50 basis points (bps) in the second half of the year, keeping interest rate differentials with the Philippines broadly steady.

As for the situation in the US, BMI was referring to the “growing political pressure” that US President Donald Trump places on the Fed. To note, Trump “has publicly and repeatedly called for looser monetary policy.”

BMI argued that should the Fed decide to reduce the key US policy rate, markets could interpret such a decision as influenced by Trump.

This would heighten doubts regarding the Fed’s independence “especially if rate cuts coincide with fiscal slippage or policy uncertainty.”

As such, BMI sees this bolstering the risk appetite for emerging currencies such as the peso.

BMI forecasts the peso to settle at ₱59:$1 by end-2025, ₱59.5:$1 in 2026, ₱57.5:$1 in 2027, and ₱58:$1 in 2028.

When it comes to monetary policy, BMI asserted that the BSP “has ample room to ease.” In particular, it expects the central bank to cut rates further by 50 bps to 4.75 percent from the current 5.25 percent, moving in lockstep with the Fed.

BMI cited subdued inflation and sluggish first-quarter growth as the main factors supporting further easing. The country’s economic growth accelerated at a nearly stagnating pace of 5.5 percent in the second quarter.

“We believe this underperformance will continue into the coming quarters, given mounting signs of softening domestic activity and the winding down of exports front-loading,” it said.